[Calc Review] Help me analyze this deal in South Colorado Springs

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Hi all, I am new to bigger pockets and analyzing deals. I saw this one online and have been running the calculations and it keeps coming up as a negative cash-on-cash return. Is this just a bad deal or am I running the numbers incorrectly? Is there any way this could be a good deal with a lower purchase price or other changes? Also, a possibly related question: The county assessor listed the property value at $299k so is the asking price of $460k way too high or is there a disconnect between assessor valuation and price? Thanks for any and all replies!

@Ryan Fisher

Nothing stands out as crazy off on the expense side. Are you using actuals for utilities, MGMT, taxes, etc? How far below market are rents and what would it take ($$$) to get the property up to standards to command market rents? Without knowing much I’d say over priced and pass. Didn’t run the numbers myself but all things equal it’s probably a deal around $350-375 from eyeballing but a lot depends on what your standards are for an investment.

Hi @Ryan Fisher , I'd be curious how closing costs on a $460k property are $3,000, and how there are $0 in repair costs on a 4-plex (with what I'm guessing are varying degrees of tenant quality).

The seller likely views it as "great cash-on-cash return" because they bought it in 2011 for $175,000:

When they say "great cash-on-cash return", they're probably referring to their own ROI, i.e. how much they're earning compared to how much they invested back in 2011. They're probably renting each of the four 2-bedroom units for $800+ a pop (or more, since I see you've got a total monthly income of $3,700 all-in). That is indeed a "great cash-on-cash return" if you bought at $175k back in 2011. It's a crap return if you buy at $460k in 2020.

I'm guessing the property has appreciated to the point that the sellers are now sitting on a pretty low ROE, and are trying to cash out at the expense of unsuspecting buyer, so that they can deploy their capital more profitably.

Apples and oranges, I'm afraid.

you have to get rents up, and possibly charge back the utilities to make it worth even considering. Or turning it into an AIRBNB 4 Plex. 

@Ryan Fisher

Yeah, likely just a bad deal. Not sure where they think they're getting that $460k number from. In a lot of other areas of Colorado Springs, that's not a bad price for a 4-plex, but you just can't demand the rents out there. Maybe you could short-term rent one of them on Airbnb, like @Aaron T. suggested, but you can only STR one of them with the new Airbnb rules passed by COS city council. (And even then, you have to make sure your property is outside of a 500' bubble from any other non-owner occupied short-term rental.)

Keep up the search! Good luck!

@James Carlson It's my understanding you can still do up to 4 in a property zoned R4 or above as long as (as you mentioned) there isn't another STR within 500 feet. I just pulled permits for the other two units in my triplex in OCC where I'm currently doing one STR and had no issues.